Authored by Carmen Reinhart via Project Syndicate,

Few would doubt that, after 15 years of ultra-low interest rates, reining in inflation by restoring real positive rates will be difficult. And with 2023 expected to bring heightened global financial and economic risks, monetary tightening will almost certainly become even more complicated.

The advanced economies are experiencing their highest inflation in 40 years, with a median rate of nearly 9% for the 12 months ending in September 2022. For central banks and financial markets, the expectation – or, more accurately, the hope – that the inflation spike would be transitory has been broadly replaced by the sobering realization that price growth is a persistent problem that demands significant and sustained monetary tightening. With the exception of the Bank of Japan, the major central banks are now raising interest rates and moving to stabilize or reverse balance-sheet growth

Few would doubt that, after 15 years of exceptionally low interest rates, this policy shift will be difficult, especially with the global economy teetering on the edge of recession. But with 2023 expected to bring heightened global financial and economic risks – not to mention rising geopolitical tensions – it will almost certainly become even more complicated.

A historical perspective illuminates some of the challenges that are likely to emerge as international financial conditions tighten. Real policy interest rates (nominal interest rates minus inflation) in the world’s financial center, the United States, have been consistently negative since the 2008-09 global financial crisis.

Real interest rates have remained negative for multiyear periods in a global financial center only four times since the mid-1800s (at least). The first three episodes were during the two world wars and in the aftermath of the OPEC oil shock from 1974-1980. In these three cases, average inflation in the US ranged from 7% to 15%, and the restoration of positive real interest rates was part of an effort to tackle inflation.

The current period of prolonged negative real interest rates is the longest of the four. Moreover, real rates in other advanced economies have been even more deeply negative. In much of Europe and Japan, nominal interest rates were also negative – a historical novelty.

Yet another historically anomalous feature of the recent “low-for-long” interest-rate era is that, under the heading of quantitative easing (QE), advanced-economy central banks have purchased massive amounts of government (or government-guaranteed) debt, setting new peacetime records. While central-bank balance sheets shrank modestly after the global financial crisis ended, they remained far larger than they were before the crisis, and swelled to new highs during the COVID-19 pandemic.

This exceptional accommodation explains why, despite significant rate hikes, the US federal funds rate remains well below the 12-month inflation rate of about 8%. Likewise, the European Central Bank’s policy rate remains well below the US federal funds rate, while eurozone inflation nears double digits.

Against this backdrop, restoring positive real interest rates – thereby stabilizing inflation – may require monetary policy to be kept tighter for longer than many policymakers and market participants seem to expect. Yet it is far from clear that central banks will maintain their commitment to tightening in the face of weakening economic activity. The persistence of inflation in the 1970s can be explained partly by the US Federal Reserve’s tendency to do too little too late or to waver in the tightening process.

Experience also points to another underappreciated risk: the return of volatility in fixed-income (bond) markets. The recent turmoil in the United Kingdom, which forced the Bank of England to launch an emergency bond-buying program, is a case in point.

Price volatility is standard in global commodity markets, regardless of the interest rate. But, in fixed-income markets, higher volatility is the handmaiden of higher and more unstable inflation rates. The variation in inflation rates across the major advanced economies was about seven times higher in 1974-89 than in 2008-21.

This means that, in the era of sustained ultra-low interest rates, fixed-income-market volatility declined steadily. Low and stable inflation rates across the advanced economies also contributed significantly to a reduction in exchange-rate volatility after 2008, as Kenneth Rogoff, Ethan Ilzetski, and I have shown.

Persistent ultra-low interest rates shaped balance sheets by encouraging private-sector and government borrowing and aggressive risk-taking in search of yield (increasing the likelihood of asset-price bubbles). While ultra-low rates technically strengthen government balance sheets, they may have created or aggravated off-balance-sheet losses, including by undermining pension-fund solvency (especially among local governments). “Low for long” has, in some cases, weakened fiscal discipline and delayed reforms.

For countries with very high debts (such as Italy), negative interest rates – together with massive debt purchases by central banks – may have replaced debt restructuring, which at least in principle can deliver faster and greater progress on debt reduction. It remains to be seen how that gap will be filled in an era of tighter monetary policy.

The message is clear: the risks posed by the exit from sustained negative real interest rates extend well beyond recession. The question is how central banks will respond when those risks manifest.

Central-bank independence seems to have eroded – not necessarily de jure, but possibly de facto, as officials weigh the broader consequences of their actions. If leverage (public and private) and risk exposures raise doubts about financial stability, will central banks return to accommodation? What if fears of a market crash emerge, or sovereign insolvencies seem imminent (as might occur in the eurozone)? In the 1970s, economies endured years of high inflation before the exit from negative real interest rates was complete.

And yet more risks loom in 2023. China – a key engine of global economic growth after the last global financial crisis – is grappling with financial and political fragilities. Tighter global financial conditions could severely damage emerging-market and developing economies in the short run. Those with large US-dollar-denominated debts will suffer even more. Already, more than 60% of low-income countries are either at high risk of distress or already there.

But just as the exit from the “low-for-long” interest-rate era raises grave risks, so, too, does persistent high inflation, which, among other things, exacerbates inequality within and across countries. To say that this is a challenging time for governments and central banks would be a massive understatement.

The Bank of America has predicted that Brent could quickly go past $90 per barrel on the back of a dovish pivot in the U.S. Federal Reserve and successful economic reopening by China.

BofA’s chief commodity strategist Francisco Blanche forecast that Brent prices–currently trading around $78–will average $100/bbl in 2023 thanks to Chinese oil demand recovery on a post-COVID reopening coupled with a drop in Russian supplies of about 1 million barrels per day (bpd). According to the investment bank, OPEC+ is likely to fully implement a 2 million bpd output cut in a bid to boost oil prices.

The forecast has come at a time when oil prices have been steadily declining due to fears that a weakening global economy would curb fuel demand. Last week, Beijing announced the most sweeping changes to its strict Covid-19 guidelines, including relaxing testing requirements and travel restrictions. Further, people infected with Covid-19 but have only mild or no symptoms are now allowed to isolate at home instead of convalescing in centrally managed facilities.

“Our oil demand and price projections for 2023 rely heavily on robust China and India demand growth, so any Asia reopening delays could affect our expected price trajectory,” said Blanch, adding that the path to a post-pandemic environment may not be easy “given the low levels of immunity in China.”

Upside aside, how much lower could oil prices fall from here? According to BofA, “downside should be limited (see $80 is the new $60 for oil), as Saudi Arabia has historically shifted crude oil production up and down in line with Brent prices (Exhibit 15) and the US government could also come in to replenish reserves.”

Additionally, western sanctions may lead to a 1mn b/d output loss according to BofA, which also notes that supply disruptions keep piling up in global oil markets. “The current period is witnessing the largest structural disruptions in the oil market since Libya went offline in 2020 due to an internal political strife. But there are also major output dislocations in other corners of the world (Exhibit 18), including Venezuela, Nigeria, or Iran. In that sense, we note the remarkable recovery in Russian crude oil runs during the past 12 months. While volumes came down at first, Russia’s refineries still have to see crude runs fall in a significant way to make a dent on balances.“

Last week, crude oil futures surrendered all gains for the year, posting their largest weekly losses in more than eight months, as restarts for key pipelines eased supply concerns coupled with ongoing worries about a global recession and weaker crude demand from China. Front-month Nymex crude for January delivery finished the week -11.2% lower to $71.02/bbl, extending its losing streak to six straight sessions, while February Brent crude closed -11% to $76.10/bbl, the biggest weekly percentage decline for both benchmarks since April.

Full report available to pro subscribers in the usual place.

Authored by Mike Valles via The Epoch Times,

The final stimulus checks in California are currently being sent out. Distributing the money started in October when it was sent via direct deposit. The program is called the Middle Class Tax Refunds (MCTR), and recipients will receive between $200 and $1,050.

The reason for the California state stimulus checks is to help residents cope with high inflation occurring across the nation. It is a one-time payment, and they should all be made between October 2022 and January 2023, says the California Franchise Tax Board (FTB)—the agency responsible for distributing the money.

People that have not yet received their California stimulus check can expect to receive a debit card in the mail. Most everyone expecting money should have already received it. Only some debit cards remain to be mailed, but most have already been sent.

How Much to Expect

The amount of the California economic stimulus checks for inflation relief will vary based on the situation and income. Single taxpayers making less than $75,000 and couples filing jointly earning less than $150,000 a year will receive $350 each.

If there are dependent children, CBSNews says, an additional $350 will be added per child—up to two children. The result is that a couple with two children earning less than $100,000 would get a check for $1,050.

Singles earning between $75,000 and $125,000 and couples earning between $150,000 and $250,000 can expect to receive $250, plus an equal amount for a family, for a total of $750.

Singles earning between $125,000 and $250,000 and couples earning between $250,000 and $500,000 will get $200, plus an equal amount for a family, for a total of $600.

Singles that earn more than $250,000 and couples earning more than $500,000 do not qualify for the new stimulus check.

Direct Deposit Payments

Direct deposit payments for the MCTR started in early October and were sent to those who received the Golden State Stimulus (GSS) checks by mail. Others that did not receive a GSS check have also received their MCTR direct deposit by Nov. 14.

Debit Card Payments

If you did not receive a direct deposit of the MCTR yet, you will likely get it in the form of a debit card in the mail. Debit cards started being mailed out on October 24, 2022, but will not be completed until January 14, 2023.

People that did not qualify for the GSS checks will receive their debit cards after Dec. 5, 2022, through the end of the month. Others who have changed their banking information will have their cards sent out last—sometime between Dec. 17, 2022, and Jan. 14, 2023.

Qualifications for the MCTR

Qualifying for the MCTR is simple enough. You just had to have been a California resident in 2020 for more than half a year, and on the date the payment is sent to you. You also must have filed your 2020 taxes by Oct. 15, 2021. Also, you cannot be claimed as a dependent and not have a California adjusted gross income of more than $75,000.

What to Do If Stimulus Payment Not Received

There may be several reasons why you have not received a stimulus check yet. ABC10 says that some reasons could include not qualifying for the stimulus payment, a change of address, or a change of bank.

When to Expect Your Stimulus Payment

Californians that qualify should already have received their stimulus check. Those who will be getting a debit card should have it mailed by the end of the year—but it may take up to two weeks to have it delivered.

Other States Also Have Stimulus Payments

California is not the only state that is trying to help its residents. Other states have found different ways to help people cope with the high inflation rates, but in most places, the help ends in December.

Forbes mentions that 19 states have offered some kind of stimulus payment to help those in need. The state offering the biggest refund is Alaska, where they are giving up to $3,284 and an additional $650 as an energy relief payment.

One state—Minnesota—limited sending out stimulus payments to front-line workers. They needed to have worked a minimum of 120 hours between Mar. 15, 2020 and June 30, 2021 to receive the payment.

Rhode Island paid $250 per child as a rebate. Residents could claim up to three children.

Two states offered a low cash rebate or a percentage of your state taxes—whichever one was larger. Idaho offered $75, or 12 percent of their state taxes, and Massachusetts residents received a rebate of 14 percent of their tax liability. Some states sent stimulus checks to everyone in their state—regardless of their income.

Several other states started making incentive proposals, but nothing has been determined yet. Most likely, a final decision probably will not be made before the end of the year.

The state accepting the latest tax return to determine stimulus check eligibility is South Carolina. This state, according to Kiplinger, is giving residents with a tax liability up to Feb. 15, 2023, to file a South Carolina income tax return for 2021. People that file their return after Oct. 17 will have their rebate payment (up to $800) sent before Mar. 31, 2023.

Tracking Your Stimulus Rebate

Although everyone would like to know exactly when they will receive their stimulus payment, there is no way to do it. KTLA says there is currently no way to track it, but FTB.CA.gov can give you a good idea when to expect it.

With long-term inflation expectations (those 3-Years ahead or more) peaking more than a year ago, and even shorter inflation expectations – at least according to the NY Fed Survey of consumers – now sliding after hitting a record high 6.8% in June and dropping alongside 2Y breakevens which recently hit the lowest level in 2 years…

… it is hardly a surprise that the latest just released NY Fed survey showed a continued drop in inflation expectations, as median one-, three-, and five-year-ahead inflation expectations decreased to 5.23%, 3.00%, and 2.3%. Of those, the former saw the biggest drop on record, plunging more than 0.7% from October’s 5.94% print, and well on their way to the pre-covid levels around 3.0%

Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—decreased at the short-term and medium-term horizons.

Separately, the median home price growth expectation dropped to 1.0% from 2.0%, the lowest reading since May 2020 a decrease which “was broad-based across education and income groups but most pronounced for respondents from the South” and yet still a 1% increase which is laughable when 30Y mortgages are about 6-7%…

… while labor market expectations paradoxically strengthened (apparently no tech workers were surveyed)…

… and household income growth expectations increased to 4.48%, up from 4.32% and a new series high. Not surprisingly, the increase was driven exclusively by respondents with no more than a high school education.

Amusingly, these improvements in income and labor market expectations are taking place even as a larger percentage of consumers, 11.79% vs 11.56% in prior month, expect to not be able to make minimum debt payment over the next three months.

Remarkably, despite the worst bear market in years, 35.7% of respondents, an increase from 33.9% last month, expect stocks to rise in the next 12 months. Then again, 40% expected higher stock prices one year ago: that didn’t work out too well.

Looking at various prices, over the next year consumers expect gasoline prices to rise 4.75%; food prices to rise 8.27%; medical costs to rise 9.59%; the price of a college education to rise 9.41%; rent prices to rise 9.82%

More in the full NY Fed survey which can be found here.

Authored by Steve Watson via Summit News,

Senator Rand Paul warned Friday that under Democratic government young people in America are falling prey to a rapidly worsening mental health crisis.

In an appearance on The Ingraham Angle, Paul raised the issue of doctors carrying out transgender surgeries on children, and the propaganda that has prompted a massive increase in Americans feeling they do not have the ‘right’ body.

“Who is responsible for telling a four-year-old that we need to talk about their gender and whether they’re in the appropriate body?” Paul asked.

“Who’s talking about giving picture books to six-year-olds with illustrations of surgery to remove their genitalia?” the Senator continued.

“It’s Democrat politicians and woke left-wing people,” Paul asserted.

“There’s not one Republican — look, Republicans are not perfect. But Republicans are not pushing your child to have surgery to remove their genitalia as early as elementary school. No Republican is pushing this,” Paul reiterated.

Transgender Health Secretary Says Biden White House Will “Empower” Children to Get Puberty Blockers, Sex Change Surgery

Watch: Planned Parenthood Cartoon Touts Puberty Blockers For Children

“These are crazy left-wing Democrats. It was also crazy left-wing Democrats who were for the lockdown across America,” Paul continued.

“There’s no secret who was involved with the lockdowns, and they have had an impact,” Paul also noted, adding that three months into the pandemic when it became clear that children were not becoming seriously ill from COVID he advocated reopening schools.

Watch:

In the same interview, Paul commented on the disturbing threats that emerged last week toward him and school children in Kentucky, noting that he has urged the FBI to “leave no stone unturned,” to prevent another potential mass shooting.

*  *  *

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At least $73 million in political donations tied to Sam Bankman-Fried’s FTX , showered mostly on high-ranking Democratic politicians, may be at risk of being clawed back through the crypto empire’s bankruptcy, as lawyers search for assets to repay creditors.

Hilariously, Bloomberg attempts top frame the contributions as bipartisan and “wide-ranging,” despite Bankman-Fried, who’s never met President Biden, being heralded as “one of the people most responsible” for Biden’s 2020 win.

Is that why SBF is “one of the people most responsible for Biden being in office”? https://t.co/HYoude5zHr pic.twitter.com/hfs8LO94E3

— zerohedge (@zerohedge) November 19, 2022

SBF also donated to Democratic Rep. Ritchie Torres of New York, who just months ago was one of 8 members of Congress who lobbied against regulating crypto (and is now totally calling for an SEC investigation).

“Nobody ends up looking great in this,” says University of Rochester political science professor, David Primo.

While there’s precedent for forcing political entities to return contributions in cases of fraud, recovery prospects are unclear in FTX’s case. Recouping campaign funds as part of the bankruptcy proceedings is a complicated and lengthy process, and the scope of the total funds eligible for clawback depends on myriad federal and state laws. It is also subject to the bankruptcy lawyers’ judgment on what money, which may be long spent by the time the FTX trustees try to go after it, is worth the effort.

Bankman-Fried is facing additional scrutiny for recently saying he gave equally to Republicans and Democrats, but funded conservatives through  “dark money” groups that don’t identify donors. The claim is almost impossible to verify unless the recipients voluntarily disclose they received money from him. -Bloomberg

One factor noted in the debate over clawbacks is whether the bankruptcy court determines there was fraud or fraudulent intent involved in the collapse of FTX, according to Ilan Nieuchowicz, a litigator for law firm Carlton Fields. If that’s the case, nearly all donations tied to FTX could be a recovery target. If not, then only those made within the 90-day period prior to FTX’s insolvency, or around $8.1 million, would potentially be subject to recapture.

Some lawmakers are being proactive – with Michigan Democrat Debbie Stabenow announcing that she will donate $20,800 receive from SBF to a charity in her state. Republican Jophn Hoeven (see, bipartisan!), says he will give $11,600 received from SBF to the Salvation Army.

That said, donating the money to charity won’t necessarily keep the victims of fraud from attempting clawbacks – as the bankruptcy trustee could still ask that the donations made by those who received FTX money still return the funds.

Of the $73 million Bankman-Fried, Salame, Singh and FTX corporate entities donated, $45.5 million, or 63% of that total, went to their own personal super-PACs, including Bankman-Fried’s Protect Our Future and Salame’s American Dream Federal Action. Salame backed Republicans, while Bankman-Fried and Nishad largely supported Democrats. 

Most of the money from those entities has already been spent, paid to a long list of vendors to support various office seekers. Bankman-Fried’s PAC only had $384,588 cash on hand as of late November, the last time the entity was required to publicly report its finances. -Bloomberg

Meanwhile, $26.6 million of FTX-linked contributions went directly to large super PACs, including those who gave money to House and Senate leadership of both parties (and of course, the proportion isn’t mentioned). 

“It’s a lot easier to return a symbolic $1,000 contribution than it is $1 million to a super PAC,” said Charles Spies, who practices political law at Dickinson Wright.

This wouldn’t be the first time campaign donations were clawed back by bankruptcy trustees. In 2011, a district court judge ordered five party committees – including the DNC and its Republican counterpart, to return $1.6 million in donations from Allen Stanford, one of his top lieutenants, and his Stanford Financial Group, made between 2000 and 2008, before his Ponzi scheme collapsed in 2009.

According to attorney Kevin Sadler, “With contributions in the millions, the trustee has to pursue it.”

Now that the market is aggressively pricing in the coming Fed pivot, yields on the short-end are tumbling, and nowhere was that more evident than in today’s 3Y TSY auction, which saw the high yield on $40 billion in paper tumble from last month’s 4.605% to just 4.093%, the lowest since September and also a 0.3bps stop through the 4.096% When Issued, the 6th stop through in the past 9 auctions.

The bid to cover was 2.55, down from 2.57 in November, but above the 2.50 six-auction average. The BTC on the 3Y auction has been attached to the 2.50 level for the past 4 years.

The internals were solid, with Indirects taking down 61.7%, down from 62.2% last month but well above the recent average of 57.5. And with Directs awarded 20.4%, up from 17.0% in November, it meant that Dealers were awarded just 17.9%, down from last month’s 20.78% and the lowest on record.

Overall, a solid 3Y auction even if it took place as yields were pushing to session highs, and one which set the stage for today’s second auction when the Treasury sells 10Y paper at 1pm.

Authored by Irina Slav via OilPrice.com,

• The oil price cap that came into effect last week was designed to keep Russian oil flowing into international markets while reducing Russia’s revenues.

• While the price cap may have made sense on paper, it has proven to be confusing for oil traders who very rarely trade crude at fixed prices.

• To add to these worries for traders, Turkey is continuing to ask for proof of insurance for tankers passing through the Bosphorus and Dardanelles, further disrupting supply.

Last week saw the start of a price cap mechanism conceived of by the U.S. and embraced by the G7 and the European Union, aimed at keeping Russian oil flowing into international markets but reducing Russia’s revenue from that oil.

The price cap came into effect in the company of an almost complete embargo on Russian oil imports into the European Union, giving traders in Europe at least a theoretical opportunity to buy and sell Russian crude. But the authors of the cap did not think about oil traders.

To begin with, about half of the G7, including the U.S., Canada, and the UK, already have a ban on Russian oil imports, so the cap will make no difference to their supply of foreign oil. Japan, although backing the cap, has been exempted because it is entirely dependent on imported hydrocarbons.

Then comes the bigger problem, and that problem is that crude oil is just not traded under fixed prices, which is already causing headaches in the sector. In fact, oil is traded in such a way that it could often be impossible to comply with the cap, even assuming Russia would sell to cap backers.

Bloomberg cited traders last week as saying that a lot of them risked getting stuck with Russian crude cargos that cost more than the $60-per-barrel cap, unable to access Western insurance and tankers because of that fact. And that, in turn, would threaten the supply side of the global oil equation.

“Physical traders rarely trade on a fixed price,” John Driscoll, chief strategist at JTD Energy Services, told Bloomberg.

“It’s a much more complex space where they trade on formulas and spot differentials to a benchmark crude for the trading of actual cargoes as well as for hedging that follows.” 

The report went on to explain that the top three Russian oil blends—Urals, Sokol, and ESPO—are priced under forward or floating contracts, which means that the final price of a cargo is only determined several weeks after the purchase of the cargo.

Bloomberg gives an example of these pricing models with a recent Chinese purchase of a cargo of Russian ESPO. The price for the cargo, per the contract, is a discount to the average of the front-month Brent crude futures and this average will only be calculated at the end of this month.

This creates all sorts of complications for traders that want to comply with the price cap—there is simply no way of knowing if the price of a cargo will remain below the cap by the time it needs to be paid, again, assuming Russia does not make good on its promise to stop selling oil to parties that enforce the cap.

How this can create problems in the physical oil market – the market that matters the most – is obvious. Cargos could get delayed or never reach their destination because the deal gets canceled because it had violated the cap. And there is already a disruption in the physical market, thanks to Turkey.

Following the introduction of the price cap, Turkey started asking for proof of insurance for all tankers passing through the Bosphorus and the Dardanelles. Because insurers have so far refused to provide the documents claiming they have never needed to do so before, there are more than 20 tankers stuck in the Turkish straits with more than 20 million barrels of crude.

All but one of the tankers carry Kazakh crude, which gets via pipeline to Russian ports and from there goes on to international markets. The one tanker carrying Russian crude was allowed to pass the straits earlier this week.

“These cargoes would not be subject to the price cap under any scenario, and there should be no change in the status of their insurance from Kazakh shipments in previous weeks or months,” one U.S. government official who CNBC called “a price cap official,” said.

Yet Turkey appears insistent on seeing proof of insurance, and the club of big insurers, the International Group of P&I Clubs, insists it cannot provide a guarantee of insurance coverage in case it so happens that a vessel with such coverage violates the price cap and drags its insurer down with it.

Western officials have been quick to slam Turkey for its additional insurance proof demands, with that same unnamed price cap official from above telling the FT that “The price cap policy does not require ships to seek unique insurance guarantees for each individual voyage, as required under Turkey’s rule. These disruptions are the result of Turkey’s rule, not the price cap policy.”

If those tankers remain stuck for another week, the absence of these 20 million barrels will begin to be felt, according to analysts. And if the pricing confusion on physical markets persists—and there is no reason for it not to—more cargos might get stuck and undelivered. And this will be happening in a market that, despite the recent price developments, remains undersupplied, as Canadian fund manager Eric Nuttall reminded everyone earlier this week.

At a moment the Biden administration is still on the defensive over the one for one Brittney Griner and Viktor Bout prisoner swap, former President Donald Trump on Sunday once again bashed the “crazy and bad” deal. 

He also revealed that during his time in the White House the Russians made an offer which would have resulted in ex-Marine Paul Whelan gaining his freedom, however, he explained he turned it down at the time because it was not worth the US setting free a convicted international arms trafficker and terrorist.

“I turned down a deal with Russia for a one on one swap of the so-called Merchant of Death for Paul Whelan. I wouldn’t have made the deal for a hundred people in exchange for someone that has killed untold numbers of people with his arms deals,” Trump said on the social media platform he founded, Truth Social. 

Upon his release by the Biden administration last week, Bout was serving 25-year sentence at a US federal prison, while Griner had been held for 10-months and had recently been transferred to a labor camp to complete a 9-year sentence for bringing drugs into the country.

While Trump asserted in his fresh comments that he “would have gotten Paul out” – though without specifying what shape such a deal would have taken – he said the following of the Biden swap which freed Griner, but which left Whelan and at least one other American, Marc Fogel, behind: 

“The deal for Griner is crazy and bad. The taking wouldn’t have even happened during my Administration, but if it did, I would have gotten her out, fast!”

But again, he didn’t specify how that theoretically would have been in accomplished. Presumably he may have looked at the cases of other Russians that Moscow may be interested in receiving back.

Paul Whelan’s family, however, has said the Trump administration had never seemed interested in freeing him, with brother David Whelan saying, “I think the first two years, partly I think the Trump administration was not prepared to or not interested in working on wrongful detention cases,” in weekend comments on MSNBC. “The Biden administration is much more engaged in wrongful detentions,” he said. 

White House officials have in the meantime taken to the Sunday talk shows to deflect GOP criticism of the swap, with National Security Council spokesman John Kirby saying “They weren’t on the phone. They weren’t watching the incredible effort and determination by [Roger Carstens] and his team to try to get both Paul and Brittney out together.”

Russian media, meanwhile, has been spiking the proverbial football…

Wowwww Russian media BRUTALLY mock the U.S. for trading Brittany Griner for Viktor Bout. And really, are they wrong?

pic.twitter.com/9zOK25x9WO

— Liz Wheeler (@Liz_Wheeler) December 9, 2022

Kirby added in response to anger over such a notorious Russian criminal being granted freedom: “In a negotiation, you do what you can. You do as much as you can. You push and you push and you push. And we did. And this deal we got last week, that was the deal that was possible. It was the deal we could get now. Now was the moment we could get it, and we executed it.”

Authored by Mike Shedlock via MishTalk.com,

Binance says an audit shows proof of reserves of customer funds. But its auditor will not vouch for the reserves nor the methodology demanded by Binance…

“CZ” Image likeness courtesy of Coin Telegraph article below

Binance’s Proof of Reserves Statement

When we say Proof of Reserves, we are specifically referring to those assets that we hold in custody for users. This means that we are showing evidence and proof that Binance has funds that cover all of our users assets 1:1, as well as some reserves.

When a user deposits one Bitcoin, Binance’s reserves increase by at least one Bitcoin to ensure client funds are fully backed. It is important to note that this does not include Binance’s corporate holdings, which are kept on a completely separate ledger.

What this means in actual terms is that Binance holds all user assets 1:1 (as well as some reserves), we have zero debt in our capital structure and we have made sure that we have an emergency fund (SAFU fund) for extreme cases.

The above Proof of Reserves Claim is interesting. If you have assets 1:1 then you should not need an emergency fund for extreme cases. 

Audit by Whom?

The pseudo audit was by Mazars, a mid-tier global accounting firm according to the Wall Street Journal.

Its U.S. arm Mazars USA previously worked for former President Donald Trump’s company. Earlier this year Mazars USA said it would withdraw from its work for Mr. Trump’s company and could no longer stand by financial statements it had previously prepared.

Binance didn’t specify which of Mazar’s offices would be doing the verification of the reserves. A Mazars spokesman declined comment.

Mystery Finances

After the collapse of Crypto exchange FTX, Binance Is Trying to Calm Investors, but Its Finances Remain a Mystery. 

• Mazars said it performed its work using “agreed-upon procedures” requested by Binance and that “we make no representation regarding the appropriateness” of the procedures. 

• The report didn’t show total assets or total liabilities. Rather, its scope was limited only to bitcoin assets and bitcoin liabilities. Binance said it would begin releasing information about other crypto tokens in the coming weeks.

• “It’s important for us to show users that the coffers are not bare, like at FTX,” said Binance’s chief strategy officer, Patrick Hillmann.

• In an interview, Binance’s Mr. Hillmann said the Mazars letter covered all the bitcoin assets and bitcoin liabilities for the company’s Binance.com exchange—although the Mazars letter itself didn’t say this.

• During the interview, Mr. Hillmann also at times referred to the work performed by Mazars as an “audit.” Asked about the appropriateness of Binance’s use of the term “audit” in the news release and elsewhere, Mr. Hillmann said: “We’re talking about a review of our assets in custody.” He also said: “I would just say we’re parroting others’ descriptions of this as an independent audit.”

• Other basic information about Binance is lacking. Mr. Hillmann said he couldn’t provide the name of Binance’s ultimate parent company because Binance over the past year and a half has been in the process of a broad corporate reorganization. 

First Rule in Truth Telling

The first rule in telling the truth is “Don’t lie”. 

The second rule in truth telling is to not sound like you are hiding something. This is especially important when overall trust is in the gutter anyway.

This was not an independent audit. Mazars did not describe it that way and the company would not certify the methodology it used. Heck, neither Mazars nor Binance disclosed the precise methodology.

Who was Hillmann parroting in describing the procedure as a audit? Sadly no one asked, but my bet is Hillman was parroting himself or someone else at Binance. 

Nor would Binance disclose its parent company due to a 1.5 year reorganization. WTF?

Potential Kiting

@cz_binance talk is the cheapest and not so sweet. His word is mud

Binance in Hot Water After Moving $2.7B Out of Proof of Reserves Wallethttps://t.co/fv1RamYiSY https://t.co/NfGf3QPzBB

— Nouriel Roubini (@Nouriel) November 18, 2022

Binance is receiving flak from the crypto community after moving $2.7 billion out of its proof-of-reserves wallet. The exchange responded, saying the move was to a TRX cold wallet.

The procedure was even more bizarre because it comes on the heels contradictory statements by Binance CEO Changpeng “CZ” Zhao.

If an exchange have to move large amounts of crypto before or after they demonstrate their wallet addresses, it is a clear sign of problems. Stay away. Stay #SAFU. 🙏

— CZ 🔶 Binance (@cz_binance) November 13, 2022

“If an exchange have to move large amounts of crypto before or after they demonstrate their wallet addresses, it is a clear sign of problems. Stay away. Stay #SAFU.”

Binance CEO Explains 127K BTC Transfer

Please consider the Coin Telegraph Binance CEO Explains 127K BTC Transfer.

A few weeks ago, CZ declared that it’s bad news when exchanges move large amounts of crypto to prove their wallet address.

Cryptocurrency exchange Binance is moving large amounts of cryptocurrency as part of its proof-of-reserve (PoR) audits, according to its CEO, Changpeng “CZ” Zhao.

“The auditor requires us to send a specific amount to ourselves to show we control the wallet. And the rest goes to a change address, which is a new address. In this case, the input tx is big, and so is the change.”

Wait! What?

1. CZ says it’s bad news when exchanges move large amounts of crypto to prove their wallet address.

2. CZ Moves 127,000 Bitcoins

3. CZ says the auditor demanded this but Mazars, the alleged auditor, does not call it an audit.

4. Mazars would make no representation regarding the “appropriateness” of the procedures.

5. Mazars said the  “agreed-upon procedures” were requested by Binance not by Mazars.

Not to worry

• 1 BTC = 1 BTC

• 127,000 BTC = 127,000 BTC (unless they have been counted multiple times)

Meanwhile please note Global Squabbles Erupt Around the World Over the Remaining Crypto Assets of FTX

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